Form 16: salary TDS certificate under Section 203 of the Income Tax Act

What is Form 16?

Form 16 is the TDS certificate issued by an employer under Section 203 of the Income Tax Act, 1961. It certifies that tax has been deducted at source on the salary paid to the employee during a financial year and deposited with the Government. It comes in two parts — Part A and Part B — and is mandatory if any TDS was deducted, even if the amount is zero across the year (a few exemptions apply).

Part A vs Part B

Part A is system-generated from the TRACES portal of the Income Tax Department. It contains:

• Name, address and TAN of the deductor (employer).
• Name, address and PAN of the deductee (employee).
• Period of employment with the deductor for the financial year.
• Summary of salary paid and TDS deducted and deposited, quarter-wise, with challan and BSR details.

Part B is prepared by the employer (or its payroll software). It carries:

• Detailed break-up of gross salary — Section 17(1), 17(2) perquisites, 17(3) profits in lieu.
• Exemptions under Section 10 (HRA, LTA, gratuity, leave encashment, etc.).
• Deductions under Chapter VI-A (80C, 80CCD, 80D, 80E, 80G, etc.).
• Tax regime opted by the employee (old vs new under Section 115BAC).
• Computation of taxable income and tax payable.

Issuance deadline

Form 16 for a financial year must be issued by the employer to the employee on or before 15th June of the following financial year. For FY 2025–26 the deadline is 15 June 2026. Delay attracts a penalty of ₹100 per day per certificate under Section 272A(2)(g), subject to a cap.

Form 16 vs Form 16A vs Form 16B

• Form 16 — TDS on salaries (Section 192).
• Form 16A — TDS on non-salary payments (rent, contractor, professional fees) under Sections 194 series.
• Form 16B — TDS on sale of immovable property under Section 194-IA.

How Form 16 is generated

1. Employer files all four quarterly Form 24Q returns for the FY.
2. Once the Q4 return is processed (typically by late May), Part A becomes downloadable from the TRACES portal as a digitally-signed PDF.
3. Employer (or HRMS) generates Part B from payroll data — earnings, exemptions, deductions, regime choice, tax computation.
4. Part A and Part B are merged, signed (digitally or wet), and shared with each employee.

Common errors employees flag

• PAN mismatch with the employee's actual PAN (causes mismatch with Form 26AS).
• TDS deducted but not reflected in Form 26AS — typically a 24Q filing or challan error.
• HRA exemption not reflecting actual rent paid because proofs were missed.
• Wrong tax regime printed (employee declared new but Form 16 shows old, or vice versa).

Form 16 and the new tax regime

From FY 2023–24 onwards, the new tax regime is the default. Employees must explicitly opt out by submitting a declaration at the start of the FY to use the old regime. Form 16 must reflect the regime under which tax was computed; switching at ITR filing is allowed (under conditions) but creates reconciliation work.

Texlaculture and Form 16

• Generates Part B automatically from payroll, with the chosen regime, exemptions, and Chapter VI-A deductions.
• Pulls Part A digitally from TRACES once available; merges and digitally signs.
• Emails Form 16 to every eligible employee from a configured deductor mailbox.
• Maintains a downloadable archive in the employee self-service portal.

When Form 16 is not required

If no tax was deducted because the employee's estimated annual taxable income was below the basic exemption limit (with no TDS deducted), Form 16 is technically not mandatory — though many employers still issue it as good practice and for the employee's ITR convenience.